TFS Corp directors face re-election threat

TFS Corp
’s biggest institutional shareholder, Regal Funds Management, is poised to vote against the re-election of several directors, including executive chairman and founder
Frank Wilson
, at Friday’s annual meeting, saying it is unhappy with the corporate governance and level of disclosure by the timber manager.

“Any stock that falls as much as TFS, you have to be disappointed," Mr King told The Australian Financial Review.

“There are lots of things that have been disappointing about the company, including corporate governance and lack of independence, and that’s why some shareholders will be voting against the re-election of those directors.

“You have to be worried about any company that has had such high turnover of directors in recent years."

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Regal has been a shareholder for more than five years and holds a 6.1 per cent stake. It is the biggest shareholder after Mr Wilson, who holds 16.2 per cent.

Regal is not the only investor questioning the recent internal workings of the Western Australian-based company, which oversees managed investment schemes’ sandalwood plantations and makes high-value sandalwood oil and products.

Following the sudden departure of chairman Richard Alston in early October, Mr Wilson was appointed executive chairman. He remains CEO. Several other non-executive directors have also left, including Jim Craig, who departed after two months of service in December 2011.

Several shareholders expressed concern to the Financial Review that they were not informed about a takeover approach from New York-based private equity firm Lindsay Goldberg earlier this year.

Mr Wilson said the TFS board, of which he was not a member of at the time, took legal advice that disclosure of a conditional bid that was withdrawn was not required.

TFS, which has an enterprise value of about $200 million, has called in investment bank Moelis & Company to help with a strategic review to bridge the gap between TFS’s languishing share price and what those close to the company think it is worth.

Mr Wilson is facing fire from several former TFS non-executive directors and other shareholders.
Blake Myles
, who left the TFS board in 2011, is leading a group that is trying to dump the board, including Mr Wilson and former cricketer and non-executive director
Adam Gilchrist
, as well as non-executive directors Julius Matthys and Stephen Atkinson.

Mr Wilson, Mr Matthys and Mr Atkinson retire as directors at the AGM on Friday, while Mr Gilchrist does not.

Mr Myles declined to comment when contacted by the Financial Review but sources close to him said the key concern had been the lack of information and sudden revelation of a $1.3 million defence fee payable to Macquarie Capital Advisors for a takeover that was never disclosed.

Retail shareholder Simon Kebble, who along with his brother Chris owns 2.7 million shares, said: “The level of disclosure has been dismal.

“They were informed of a takeover this past year and they didn’t think it was important enough to tell shareholders anything. They didn’t tell us the bidder or price."

Mr Kebble said the chairman should be independent and the chief executive and chairman should not be the same person. But according to the ASX corporate governance principles, these are only recommendations and are not mandatory. Companies may choose governance requirements that work best for the company but must explain why the arrangement differs from recommendations.

Mr Wilson said he was nominated executive chairman with full support of the board and the board is considering further independent appointments.

“The board determined that I was the best credentialled director to assume this role," he said. “Notwithstanding this, the board is currently considering the appointment of further independent directors, including the appointment of an independent chairman," he said.

Proxy advisory firm CGI Class Lewis told clients to vote in favour of all resolutions at the AGM, but expressed concern on governance. “Without an independent chairman, but with a majority of independent directors, the board structure does not meet either ACSI or FSC guidelines," it said.